Ohio Midland, Inc. v. Gordon Proctor

• Court: Court of Appeals for the Sixth Circuit
• Decided: July 12, 2021
• Docket: 20-3720
• Status: Unpublished

Opinion

NOT RECOMMENDED FOR PUBLICATION File Name: 21a0325n.06

Case No. 20-3720

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT FILED Jul 12, 2021 OHIO MIDLAND, INC., ) DEBORAH S. HUNT, Clerk ) Plaintiff, ) KDC INVESTMENTS, LLC, ) ON APPEAL FROM THE ) UNITED STATES DISTRICT Plaintiff-Appellee, ) COURT FOR THE NORTHERN v. ) DISTRICT OF OHIO ) GORDON PROCTOR, Director, ) OPINION ) Defendant, ) NORFOLK SOUTHERN RAILWAY ) COMPANY, ) Defendant-Appellant. )

BEFORE: GILMAN, McKEAGUE, and BUSH, Circuit Judges.

McKEAGUE, Circuit Judge. The U.S. Coast Guard tasked the owner of the Bellaire

Bridge with preparing a plan for its demolition in 1998. Since then, despite administrative fines,

several transfers of ownership, nearly sixteen years of civil litigation, and one finding of criminal

contempt, the bridge still stands. In an attempt to end this saga, the district court appointed a

master to help the parties towards a resolution. When the parties were unable to come to a

resolution, the district court issued an amended order to Plaintiff-Appellee KDC Investments,

LLC, to demolish the bridge and split the master’s fees between the remaining parties. Defendant-

Appellant Norfolk Southern appeals the district court’s order that it be required to pay $8,420 in Case No. 20-3720, Ohio Midland, Inc. v. Proctor

fees, arguing that the master’s appointment was invalid and that the allocation of fees was

improper. Although we hold that Norfolk Southern waived its objection to the master’s

appointment, we agree that the district court did not properly consider the factors required by

Federal Rule of Civil Procedure 53 when allocating the master’s fees between the parties. We

therefore REMAND for further consideration consistent with this opinion.

I. This case, now in its sixteenth year, concerns the Bellaire Bridge (“the Bridge”), which

crosses the Ohio River between Bellaire, Ohio and Benwood, West Virginia. This case was last

before this Court in 2008, and what follows is a brief summary of the complex factual and

procedural background explained fully in our prior opinion.

Congress authorized the Interstate Bridge Company to construct, maintain, and operate a

toll bridge at this location on September 12, 1922. See H.B. 11901. The Interstate Bridge

Company leased land for one of the Bridge’s piers from the Pennsylvania Railroad Company.

(Defendant-Appellant Norfolk Southern Railway Company (“Norfolk Southern”) is a successor of

Pennsylvania Railroad Company). The Bridge operated as a toll bridge until 1991, when the Ohio

Department of Transportation purchased the bridge ramp on the Ohio side of the river from the

Interstate Bridge Company in order to construct Ohio Route 7, subsequently demolishing the ramp

and leaving the bridge unusable. Interstate Bridge Company then sold its interest in the bridge to

former plaintiff Roger Barack in March 1991. Roger Barack in turn assigned some portion of his

interest in the Bridge to Plaintiff Ohio Midland, Inc. In November 1998, the U.S. Coast Guard

ordered Mr. Barack to come up with a demolition plan. When Mr. Barack did not comply, the

U.S. Coast Guard issued a 2001 order to remove the bridge and, when he did still did not comply

by 2005, assessed him $300,000 plus interest and costs. In 2005, Ohio Midland, Inc. and Mr.

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Barack launched this § 1983 suit against a variety of defendants seeking, among other claims, to

adjudicate responsibility for the bridge.

The suit reached this Court in 2008, when we upheld the district court’s denial of leave to

the then-Plaintiffs to amend their complaint and affirmed the district court’s grant of summary

judgment on a subset of issues to Norfolk Southern. Plaintiffs attempted to appeal this result to

the Supreme Court, which denied a writ of certiorari on April 20, 2009, Southern had, prior to the

appeal, filed a Motion for Relief Pursuant to Federal Rule of Civil Procedure 70, seeking, among

other sanctions, an order for Mr. Barack to demolish the bridge and to hold Mr. Barack in contempt

of court. In July 2009, Norfolk Southern and Mr. Barack agreed to a timeline for the bridge to be

removed by July 21, 2011, later extended to December 21, 2011.

In 2011, following a series of transfers of ownership from Mr. Barack, Plaintiff-Appellee

KDC Investments, LLC (“KDC”) filed a motion to intervene or be substituted as a party. The

district court granted this motion, and subsequently extended the demolition deadline until

November 30, 2012.

KDC was unable to post an appropriate bond to Defendant City of Benwood for the

demolition of the bridge, further delaying demolition. On February 26, 2013, the district court

held KDC in contempt for failing to take the steps to apply for a bond and ordered fines and

additional status reports.

Despite the contempt order, KDC made little progress on obtaining a bond. Defendant

City of Benwood moved to intervene as a party and the district court granted the motion. On

September 13, 2013, the district court issued a show-cause order against KDC owner Lee Chaklos

to determine if he should be held in criminal contempt; following hearings, the district court found

Mr. Chaklos in contempt and sentenced him to 30 days imprisonment and a $2,500 fine. Op. and

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Order at 18, United States v. Chaklos, No. 2:13-cr-206 (N.D. Ohio Oct. 28, 2014), ECF No. 31; J.

at 2-3, Chaklos, No. 2:13-cr-206, ECF No. 43. Counsel for KDC withdrew in March 2014.

In 2017, having seen no progress towards removing the Bridge, the district court enlisted

Mr. David Kopech to work as a master1 to “promote resolution and removal of the bridge.” Mr.

Kopech reviewed the history of the case as well as potential funding sources and possible plans

for demolition. The district court held five status conferences running from February 22, 2018

through February 19, 2019. The transcript of the first status conference, the only one on record,

indicates that both Mr. Kopech and counsel for Norfolk Southern participated. Orders following

other status conferences reference Mr. Kopech as a participant; none indicate any objection by any

party to his involvement. The district court issued a final order on February 21, 2019, directing

the parties to reach a resolution by March 31, 2019. The parties failed to do so and no action was

taken in the case for over a year.

On June 23, 2020, the district court issued the challenged Opinion and Order. The district

court noted that the case had been “in the dismissal phase since 2007,” and that it “has done all it

can do to resolve this matter.” The Opinion and Order again ordered KDC to demolish the Bridge,

approved of Mr. Kopech’s fees, and ordered that Mr. Kopech’s fees be split evenly—$8,420

each—between Plaintiff KDC, Defendant-Appellant Norfolk Southern, and Defendant City of

Benwood. Norfolk Southern then filed this appeal challenging the district court’s order that it pay

$8,420.

1 In its Opinion and Order, the district court refers to Mr. Kopech as a “Special Master” appointed under Federal Rule of Civil Procedure 53. Rule 53 refers primarily to “masters.” The distinction between the term ‘special master’ and the term master as used in the current Rule 53—see Fed. R. Civ. P. 53(a) advisory committee’s note to 1983 amendment; Fed R. Civ. P. 53 advisory committee’s note to 2003 amendment—is not relevant here. We will refer to Mr. Kopech as a “master.”

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II. Norfolk Southern challenges the district court’s opinion and order on two grounds: one,

that Mr. Kopech’s appointment as master was invalid due to various procedural defects; and two,

that in the alternative, the district court failed to consider properly the requisite factors when

allocating Mr. Kopech’s fees between the parties. We consider these arguments in turn, holding

that Norfolk Southern has waived its objection to Mr. Kopech’s appointment but agreeing that the

district court did not adequately set forth the basis for its decision.

A.

Because Norfolk Southern objects to Mr. Kopech’s appointment as master for the first time

on appeal, it has waived its objection.

“[I]ssues not presented to the district court but raised for the first time on appeal are not

properly before this court.” J.C. Wyckoff & Assocs. v. Standard Fire Ins. Co., 936 F.2d 1474, 1488

(6th Cir. 1993). An objection to the appointment of a master under Federal Rule of Civil Procedure

53 is waived if not brought promptly following appointment or referral. See Hill v. Duriron Co.,

656 F.2d 1208, 1213 (6th Cir. 1981) (noting that a party must object to a reference to a magistrate

serving as a master under Rule 53 “either at the time of reference or soon after”); McGowan v.

Avco Corp., 817 F.2d 105, No. 86-5362, 1987 WL 37217, at *1 (6th Cir. 1987) (per curiam)

(denying appellants’ objections to appointment of master under Fed. R. Civ. P. 53 where appellant

waited sixteen months after appointment to raise the issue with the district court); 9C Charles Alan

Wright & Arthur R. Miller, Federal Practice and Procedure Civil § 2606 (3d ed.) (failure to

“contest the propriety of a reference to a master under Federal Rule 53 . . . is tantamount to

acquiescence and the reference cannot be challenged later on appeal by a party who neither has

objected to a reference nor moved to have it revoked”).

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Norfolk Southern argues that it lacked sufficient notice because there was no formal order

appointing Mr. Kopech. The record indicates, however, that Norfolk Southern was on notice of

Mr. Kopech’s involvement in the case and was corresponding with Mr. Kopech more than two

years before the challenged Opinion and Order was issued. The district court first contacted Mr.

Kopech in April of 2017, and Norfolk Southern was aware of Mr. Kopech’s involvement in the

case from at least a February 22, 2018 Status Conference at which Mr. Kopech was identified as a

court-appointed receiver. By a May 14, 2018 order, Mr. Kopech was identified as a “Special

Master.” Mr. Kopech’s time records reference several instances of direct communication with

Norfolk Southern’s counsel in this matter beginning on April 10, 2018 and correspondence with

the full group of participants, including Norfolk Southern, through February 2019. At no time

prior to this appeal did Norfolk Southern raise any objection to Mr. Kopech’s appointment or

involvement. Norfolk Southern had ample time to raise any of its objections with the district court

and, by failing to do so, acquiesced to Mr. Kopech’s appointment as master.

Because Norfolk Southern failed to object to Mr. Kopech’s appointment as master to the

district court, it has waived its opportunity to object to Mr. Kopech’s appointment as master here.

B.

On the other hand, we agree with Norfolk Southern that the district court did not properly

consider specific factors before allocating Mr. Kopech’s fees among the parties, or at least did not

provide sufficient explanation.

Federal Rule of Civil Procedure 53(g)(3) requires an appointing court to “allocate payment

among the parties after considering [1] the nature and amount of the controversy, [2] the parties’

means, and [3] the extent to which any party is more responsible than other parties for the reference

to a master.” District court decisions regarding the allocation of payment for the master between

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the parties are reviewed under the abuse-of-discretion standard. Hart v. Cmty. School Bd., 383 F.

Supp. 699, 767 (E.D.N.Y. 1974) (citing Newton v. Consolidated Gas Co., 259 U.S. 101, 105

(1922)), aff’d on other grounds, 512 F.2d 37 (2d Cir. 1975).

Although the district court assessed the reasonableness of Mr. Kopech’s fee as master, it

did not include any explanation for its decision to allocate the fee equally to all parties. Because

we cannot say that the district court considered the required factors when assessing Norfolk

Southern its $8,420 share of the fee, we have no choice but to remand.

III.

Norfolk Southern failed to object to the appointment of a master prior to bringing this

appeal and therefore has waived its arguments that the appointment was invalid. But because, the

district court did not explain its consideration of the factors required by Rule 53 when allocating a

master’s fees between parties, we REMAND for further consideration consistent with this opinion.

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